The situation changes completely as soon as leverage, margin, borrowing, certain derivatives or crypto-backed debt come into play.
A trader can then control a €10,000 position with just €1,000 in capital. If the market moves sharply against them, the platform may liquidate the position. In some configurations, particularly where negative balance protection does not exist, the loss may exceed the amount initially deposited.
The answer therefore depends less on the word “crypto” than on how the investment is structured.
Buying €500 worth of Bitcoin is nothing like opening a €10,000 Bitcoin position with €500 in margin.
Same asset.
Two completely different risks.
With spot trading, losses normally stop at invested capital
Let’s start with the simplest situation. You deposit €1,000 on a platform and then buy €1,000 worth of Bitcoin. No borrowing. No leverage. No derivative contract. You simply hold BTC.
In this case, the logic is similar to that described in our feature on Bitcoin’s volatility and sharp price swings: your asset may lose a significant portion of its value, but a price decline does not automatically create a debt.
If Bitcoin falls 20%, the €1,000 becomes approximately €800.
At -50%, it becomes €500.
At -90%, only €100 remains.
And in the extreme scenario where the asset’s value genuinely falls to zero, the position is worth zero.
Your economic loss then reaches €1,000, or 100% of the capital committed.
It does not spontaneously become €1,500.
This is a fundamental difference between buying crypto on the spot market and speculating with borrowed money.
The AMF also points out that investing in crypto assets can result in the loss of invested capital because of the market’s high volatility.
Spot trading does not mean that the investment is safe. A token can practically disappear. A platform may run into difficulties. A private key can be lost. A scam can wipe out all the funds.
But on the position itself, without debt or a derivative product, losing 100% is normally the economic ceiling.
That is already a lot.
Leverage completely changes the equation
The problem begins when an investor wants to take a position larger than their capital.
That is leverage.
Imagine that you have €1,000 but want exposure equivalent to €5,000 in Bitcoin.
With 5x leverage, the platform theoretically allows you to control this position with your €1,000 in capital serving as margin.
The upside immediately becomes more attractive.
If Bitcoin gains 5%, a €5,000 position theoretically gains €250 before fees. On €1,000 of personal capital, that represents +25%.
That is why leverage is attractive.
The reverse movement obviously exists.
A 5% decline also represents a €250 loss.
At -10%, the theoretical loss reaches €500.
At -20%, it reaches €1,000, or all the capital used in this simplified example.
In reality, the platform generally does not wait for the margin to reach exactly zero. It imposes margin levels and liquidates the position when it becomes too risky.
Our crypto glossary defines liquidation precisely as the forced closure of a position when the collateral is no longer sufficient.
Leverage therefore turns an ordinary Bitcoin move into a potentially catastrophic event for the position.
And the higher the multiplier, the less the market needs to move to cause serious damage.
A strategy can be right about Bitcoin’s direction over three months and still disappear after one bad hour.
Liquidation does not always guarantee a limited loss
This raises a question: if the platform automatically liquidates the position before the capital is completely lost, how could someone lose more than their deposit?
Because liquidation is not a universal guarantee.
Under normal conditions, the liquidation engine closes the position early enough to cover the debt.
But markets can move violently.
Suppose an asset is trading at €100 and the platform sets liquidation at around €90.
In theory, it begins selling at that level.
In practice, an extremely negative announcement can trigger a sharp drop. The order book becomes very illiquid, and the first available trades appear at €85, €80 or €70.
This is slippage, or price slippage.
The sale executes much lower than expected.
If the position was heavily indebted, the liquidation proceeds may then no longer be enough to repay the full amount borrowed.
A deficit remains.
On some platforms, insurance funds or auto-deleveraging mechanisms absorb all or part of this difference.
On others, the contract may provide for additional liability on the part of the trader.
The risk therefore depends heavily on the jurisdiction, the product and the platform’s terms.
That is also why the rules should be read before opening a margin position.
Clicking “10x” does not simply multiply potential gains.
It changes the legal and financial nature of the position.
In Europe, retail investors receive specific protection
This distinction is essential to avoid overgeneralization.
In Europe, certain leveraged products sold to retail investors are tightly regulated.
For CFDs, ESMA has notably imposed leverage limits, position close-out rules and negative balance protection. For crypto assets used as the underlying asset of a CFD, retail investor leverage is limited to 2x.
This protection means that a retail investor using a compliant CFD should not become liable for more than the funds allocated to their CFD trading account.
ESMA explains this explicitly: the retail client’s overall liability for CFDs linked to the account is limited to the funds held in that account.
This matters.
You often hear: “With any crypto leverage, you can end up owing money to the platform.”
That is not always true.
With a provider complying with the European protections applicable to retail investors, the negative balance mechanism specifically limits this risk.
ESMA also recalled in February 2026 that certain products marketed under the names “perpetual futures” or “perpetual contracts” could in reality fall within the scope of rules applicable to CFDs when they provide leveraged exposure to Bitcoin or other assets. These products may then be subject to the leverage cap, margin close-out and negative balance protection.
However, the European rule protects a specific profile.
It does not mean that every crypto product available online offers the same safeguards.
Offshore platforms change the level of risk
A large share of global crypto trading does not take place within the European framework.
Some platforms are domiciled in jurisdictions where the rules are different. Others serve clients through several entities, depending on their country of residence.
It is then possible to find 20x, 50x and sometimes 100x leverage on certain contracts.
100x leverage deserves a moment’s thought.
A move of just 1% against the position theoretically corresponds to 100% of the initial margin, even before taking fees, the precise liquidation level and other parameters into account.
Bitcoin can move 1% in a few minutes.
Altcoins can do so even faster.
BrefCrypto recently noted, in its analysis of declining leverage in Bitcoin futures, that open interest can fall very quickly when traders close their positions or are forced to reduce their exposure.
On an offshore platform, several points must therefore be checked before assuming that losses are automatically capped: is there negative balance protection? Does the insurance fund cover all deficits? Under what circumstances can the user be held liable? Which national law applies in the event of a dispute?
The answer may be buried in several dozen pages of terms and conditions.
Another pitfall is accepting professional-client status in order to obtain more leverage.
The AMF points out that a professional client may lose certain protections granted to retail investors, including protection against a negative balance in some CFD configurations.
More freedom can therefore mean greater financial responsibility.
Borrowing to buy crypto can create a genuine debt
There is a much simpler way to lose more than your crypto capital: borrow money outside the market to invest.
Take someone who has €2,000.
They borrow €8,000 from a bank or a relative and invest €10,000 in Bitcoin.
Bitcoin falls 60%.
The portfolio is now worth only €4,000.
The market loss amounts to €6,000.
But the €8,000 debt still exists, potentially with interest.
If the investor liquidates everything, receives €4,000 and repays that amount to the lender, they still owe €4,000.
Their initial personal contribution was only €2,000.
They have therefore lost their €2,000 and remain €4,000 in debt.
This is a genuine case in which the personal loss greatly exceeds the amount initially owned.
The blockchain is not responsible for any of this.
The mechanism is debt.
Exactly the same problem can occur when buying stocks, real estate or any other asset with borrowed money.
Crypto volatility simply increases the speed at which the scenario can become dangerous.
Bitcoin can correct by several dozen percent in a few months.
An altcoin can lose 80%.
A memecoin can fall almost to zero.
Financing this kind of exposure with credit adds a fixed obligation to an asset whose value is anything but fixed.
That is why “investing only money you can afford to lose” takes on even greater importance when crypto is involved.
DeFi can also lead to debt
Crypto debt does not necessarily involve a bank.
Decentralized finance protocols allow users to borrow directly on the blockchain.
The standard model is overcollateralized.
A user deposits, for example, $10,000 worth of ETH into a smart contract. The protocol then allows them to borrow 5,000 USDC.
As long as the collateral remains sufficient, the position functions.
But if ETH falls sharply, the collateral ratio deteriorates.
The protocol can then liquidate part or all of the collateral to repay the debt.
Liquidation is automatic.
There is no bank adviser calling to ask whether the client would prefer to wait a week.
The code applies the prescribed rules.
Stablecoins play an important role in these mechanisms, which is why it is also useful to understand their benefits and risks before using them in DeFi.
In many properly designed overcollateralized protocols, liquidation seeks to prevent an uncovered debt from remaining.
That does not mean that no additional risk exists.
A faulty oracle, an extremely rapid move, low liquidity, a smart-contract vulnerability or collateral depegging can disrupt normal operations.
And some structures are much more complex: borrow an asset, redeposit it elsewhere, use the new token as collateral and then borrow again.
Each layer increases the apparent yield.
It also increases the number of things that can go wrong.
Futures and perpetual contracts are not simple purchases
The phrase “buy Bitcoin” is sometimes used inaccurately.
Someone may say they “bought BTC” when they actually opened a long position on a perpetual contract.
These are not the same transaction.
On the spot market, they buy the asset.
With a future or perpetual contract, they essentially buy contractual exposure to its price.
Perpetual contracts also add the funding rate, a periodic payment between long and short traders that helps keep the contract price close to the spot market.
This cost can become significant when a position remains open for a long time.
A trader may therefore correctly anticipate a rise in Bitcoin and still earn less than expected because of funding, commissions and the execution price.
The derivatives market also has its own dynamics.
The higher open interest becomes, the more a price move can trigger a cascade of liquidations.
Positions are closed automatically.
These closures sometimes push the market even further in the same direction.
More liquidations follow.
The phenomenon can turn a normal correction into an extremely rapid decline.
The AMF considers futures to be products requiring particular attention because of leverage: it amplifies both gains and losses.
For a beginner, the distinction to remember is very simple.
Spot: you buy the asset.
Derivative: you take a contract exposed to the asset’s behavior.
The second can create risks absent from the first.
Short selling adds another loss scenario
Another difference depends on whether you are betting on a rise or a fall.
Buying an asset on the spot market has an obvious limit: its price cannot fall below zero.
A crypto asset bought for €100 can therefore theoretically lose €100 per unit.
Short selling works differently.
The trader seeks to profit if the price falls.
In a traditional short sale, they borrow the asset, sell it and then hope to buy it back more cheaply in order to return it.
Suppose they short an asset at €100.
If it falls to zero, the maximum theoretical gain is approximately €100.
But what if it rises?
€100 becomes €200.
Then €500.
Then €1,000.
A price can theoretically continue rising without an absolute limit.
A short position therefore does not have the same natural ceiling as a spot buyer’s loss.
In crypto, many shorts are opened through derivatives and liquidated well before reaching an infinite loss.
The risk nevertheless remains significant.
A short squeeze can force sellers to buy back their positions. These additional purchases push the price even higher and trigger further liquidations.
The trader who thought they were limiting risk by “simply betting against Bitcoin” then discovers that the mechanism can accelerate much faster than expected.
Once again, the underlying asset has not changed.
The type of position has.
Options can create very different obligations
Options add another layer of complexity.
Buying an option and selling an option do not carry the same risk.
An option buyer generally pays a premium.
If the option expires worthless, they may lose that premium.
The loss is therefore limited in many simple buying strategies.
By contrast, an option seller accepts an obligation in exchange for the premium received.
Depending on the type of option and how the position is hedged, the risk can be much greater.
An uncovered call sale is the classic example.
The seller essentially promises to provide exposure at a certain price if the conditions are met.
If the asset soars, their losses can become very substantial.
In professional markets, options are often used to manage risk rather than simply speculate.
A Bitcoin holder may, for example, buy protection against a decline.
A manager may build a position combining several options in order to precisely limit potential loss and gain scenarios.
Beginners sometimes focus only on the returns shown.
That is dangerous.
The more sophisticated a derivative strategy becomes, the less the figure “I invested €1,000” is enough to measure the risk.
You need to understand the obligations attached to the contract.
That is why spot investing remains much simpler when it comes to understanding exactly how much money can disappear.
A crypto asset falling to zero is not the only way to lose everything
Even without leverage, there are several ways to lose 100% of the amount allocated to crypto.
The first is obvious: buying an asset that almost completely collapses.
The second involves private keys. If a user controls their crypto themselves and permanently loses the information needed to restore their wallet, the blockchain offers no recovery button.
The third concerns intermediaries.
A fraudulent or insolvent exchange can make funds inaccessible.
The fourth concerns social engineering.
FinCEN recently linked 33,904 reports to approximately $12.7 billion in suspicious financial activity associated with investment scam networks. BrefCrypto has detailed the industrialization of these crypto scams.
A victim may voluntarily transfer their crypto assets to an address controlled by criminals because a fake adviser shows them a fictitious investment portfolio.
The blockchain executes the transaction correctly.
The problem lies elsewhere.
Three concepts must therefore be distinguished.
Losing the value of an investment.
Losing access to the investment.
And being robbed.
The financial result may be identical: zero.
The cause is not.
And unlike leverage or borrowing, these scenarios generally do not create additional debt. They simply destroy existing capital.
Stablecoins can also lose much of their value
The word “stable” can create an illusion.
A stablecoin seeks to maintain a target value.
It does not receive a metaphysical guarantee of remaining at $1.
The history of TerraUSD demonstrated this brutally in 2022. An asset designed to remain around one dollar can lose its peg when its economic mechanism collapses.
Centralized stablecoins such as USDT or USDC operate differently from algorithmic models such as the former UST.
They rely in particular on reserves and an issuer.
This creates other risks: reserve quality, partner banks, regulation, address freezes or difficulty accessing redemptions.
An investor holding the equivalent of €10,000 in stablecoins can therefore lose a significant portion of their capital if the asset suffers a severe depeg.
But here again, if the stablecoins were simply bought with their own money and held without borrowing, the loss normally remains limited to the capital held.
The scenario changes when those same stablecoins are used as collateral for a loan.
A decline in the collateral can then trigger a liquidation.
The asset’s risk and the debt risk combine.
This is a principle found throughout crypto finance: the danger rarely comes from a single mechanism.
It comes from layering.
Volatile token.
Borrowing.
Leverage.
Smart contract.
Bridge.
Then another strategy on top.
Each layer may appear reasonable in isolation.
Together, they can become highly fragile.
You do not need to lose 100% to ruin a portfolio
The fear of “losing more than your investment” may also conceal a more common problem.
You do not need to reach -100% to suffer a loss that is difficult to recover from.
Suppose you have a €10,000 portfolio.
After -20%, €8,000 remains. You need +25% to return to the starting point.
After -50%, €5,000 remains. You need +100%.
After -75%, €2,500 remains. You need +300%.
After -90%, only €1,000 remains. You then need +900% to recover the initial €10,000.
This is why risk management matters more than the constant pursuit of maximum returns.
Some traders look for a crypto asset capable of going 10x.
After losing 90% of their capital, they need precisely a 10x merely to get back to zero.
This situation is particularly common among small-cap assets.
An altcoin can lose 80% and then another 80%.
The second decline is not “just” a repetition of the first figure: it applies to the remaining capital.
€100 becomes €20.
Then €20 becomes €4.
The total loss reaches 96%.
The market can therefore ruin a strategy without ever creating debt.
The distinction matters: being unable to lose more than your stake does not make the stake reasonable.
A 100% loss is still 100%.
Fees, interest and funding can push losses further
Even when the asset has not lost all its value, costs can gradually increase the damage.
A margin position may incur interest on borrowed funds.
A perpetual contract may incur funding rates.
A DeFi protocol charges borrowing interest.
An on-chain transaction incurs network fees.
The platform may add liquidation fees.
The trader also pays opening and closing fees.
Individually, each may appear small.
On a highly leveraged position held for a long time, they can become significant.
Imagine a trader who invests €1,000 and then borrows to increase their exposure.
The price eventually ends up almost exactly where it started.
They might think: no loss.
But they have paid several days or weeks of funding, trading commissions and possibly interest.
Their result becomes negative even though the asset’s price has barely moved.
This explains why derivative products should not be analyzed solely by asking “How high can Bitcoin go?”
The cost of time also matters.
The most fragile strategies are often those that require several things to go right at the same time: a favorable price, affordable funding, sufficient liquidity and no liquidation.
Spot buying is less spectacular.
It has fewer moving parts precisely because of that.
The real question is: is there debt behind the position?
This is probably the simplest way to answer the entire issue.
Are you buying €500 worth of Bitcoin with €500 that belongs to you?
The loss on that purchase is normally limited to the €500 committed.
Are you buying €500 worth of an altcoin on the spot market?
The same logic applies. The token may fall practically to zero, but no debt is automatically created.
Are you holding stablecoins bought with your own money?
You may face a depeg, an intermediary failure or a vulnerability, but the simple position itself does not involve debt exceeding the capital.
Are you opening a leveraged position?
You need to check the margin rules and negative balance protection.
Are you borrowing to buy crypto?
You can clearly lose your contribution and still have a debt.
Are you using a DeFi protocol to borrow against collateral?
Liquidation and the way the debt works become central.
Are you selling certain options or taking complex derivatives?
The initial stake is no longer necessarily a good measure of the maximum loss.
The important word is therefore not just crypto.
It is obligation.
Who owes what to whom if the market turns?
That is the question to ask before adopting any strategy.
It is far more useful than the advertised return alone.
How to avoid turning a loss into debt
The simplest way to limit financial losses to your capital is not to borrow for investing and to avoid leverage until you fully understand how it works.
Buying on the spot market with available funds makes the calculation immediately clearer.
The asset can collapse.
The loss remains painful.
But no bank or platform comes asking for repayment of exposure financed with debt.
You should also check the intermediary’s status. In France, since July 1, 2026, providers offering crypto-asset services must hold the appropriate CASP status.
For derivatives, you need to go further and check the specific regulations applicable to the product and provider.
A European retail investor using a compliant CFD benefits from protections that may not exist on a foreign platform or after giving up retail-client status.
The same logic applies to DeFi: understand the collateral ratio and liquidation level before looking at the APY.
Finally, position size remains decisive.
A spot strategy may be legally limited to a 100% loss and nevertheless ruin someone if it represents all their savings.
The right limit is therefore not simply “I cannot lose more than my stake.”
You must also ask:
what does this stake represent in my financial life?
A €500 portfolio lost by someone with €50,000 in savings does not have the same impact as the same €500 representing all available savings.
And when trading begins to trigger continued losses, repeated use of leverage or the need to “make it back today,” our feature on crypto trading addiction and its warning signs reminds us that a financial problem can quickly become behavioral.
The final answer is therefore fairly clear.
With spot trading and no debt, you normally cannot lose more than the capital invested. With leverage, borrowing or certain derivatives, losses can exceed the initial stake depending on the product and the protections that apply.
In Europe, negative balance protection limits this risk for certain CFDs offered to retail investors.
Elsewhere, it must be checked.
Always.
Because in crypto, the real danger is not only seeing an asset fall to zero.
Sometimes it is discovering too late that the position involved a debt you had never really examined.
